With More Support in Senate, New Reverse Mortgage Oversight Seems Inevitable

The Wall Street Journal is reporting that Senators Scott Brown of Massachusetts and Olympia Snowe of Maine both said they would support the Wall Street reform bill, which should give Majority Leader Harry Reid enough votes to clear the 60-vote threshold to bring the financial overhaul bill to the floor this week.

The bill already passed the House of Representatives several weeks ago and Senate passage would send the bill to the White House, where President Obama is expected to quickly sign it into law.

“While it isn’t perfect, I expect to support the bill when it comes up for a vote,” Brown said in a statement. “It includes safeguards to help prevent another financial meltdown, ensures that consumers are protected, and it is paid for without new taxes.”

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The bill includes over 2000 pages and impacts just about every part of the financial industry, including reverse mortgages. Specifically, it creates a Consumer Financial Protection Bureau which has the independent authority to write and enforce rules about consumer lending in mortgages, credit cards and other financial products.

Housed in the Federal Reserve, the bureau would be required to conduct a reverse mortgage study to determine any deceptive or abusive practices within one year. It would also determine whether suitability standards are necessary, as well as safeguards to protect consumers from being sold reverse mortgages to fund inappropriate annuities, investments, and other financial products.

The bureau would also have the authority to issue regulations, orders, or guidance that apply to reverse mortgages prior to the completion of the study.

Exactly what type of regulations will come from the bill isn’t clear, but lobbying firms and associations are turning away from legislators and to the agencies that will carry out the measures.  According to the Financial Services Roundtable, 199 rules could be put into practice and 68 studies will need to be conducted after the bill is signed into law.

Finance Bill Close to Passage in Senate

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  • >>Please let me know where I could find out more about this.rnrnI read about it at RMD last month. Here you go:rnrnCourt Rules Reverse Mortgage of Deceased Mother Can Be Paid Off in Bankruptcyrnrnhttp://rmdaily.wpengine.com/2010/06/24/court-rules-reverse-mortgage-of-deceased-mother-can-be-paid-off-in-bankruptcy/

  • Rainmand, last year I attended a presentation by Western Center on Law and Poverty and they were assuming that the non-borrowers were simply tenants limited to landlord tenant protections. What youu2019re saying is interesting but how can they have standing if their names are not on the property title? I hope youu2019re right. Please let me know where I could find out more about this.

  • By the way, this is NOT the Wall Street Reform bill like our President refers to it as. The bill is called, the “Financial Regulatory Reform Bill” ! Plain and simple. rnrnI have spoken many times on this bill over the past few weeks. This bill will affect the reverse mortgage industry. The new Financial protection Bureau, which most likely will established by a group of bureaucrats that have no business passing judgment on what should regulate our industry and what should be done to protect the senior citizen from such evil people as us? rnrnThis bill is not only about the reverse mortgage industry, this is about a bill that will affect every American citizen adversely. As I had said before, if this bill passes the senate, we will see the largest shift of power to the federal government than I can ever remember.rnrnI pleaded last week for everyone to please contact senators, mainly the Democrats but all senators. I asked you all to please ask the senators to vote NO on this bill. I don’t know how many of you and the other people I sent the plea out to for help on this issue reacted? Those of you that did nothing, may wind up with what you deserve. Those who tried, I congratulate you for your effort, lets hope it was not all for naught.rnrnThis bill beats them all my friends, I am infuriated but saddened by what I see taking place in our great nation. Time is up, nothing more we can do but wait for the results. If the bill passes, we must do what ever it takes to have it revoked.rnrnThank you,rnrnJohn A. Smaldone

  • Hawkey,nI really donu2019t think itu2019s a u201cChicken Littleu201d thing. I think itu2019s more a u201cLook before you leapu201d. Michael Jones states that he doesnu2019t know what percentage of reverse mortgage borrowers have extended family members living with them. Thatu2019s the point. No one really knows whou2019s living in the homes. No one is tracking it and no studies have been conducted. I checked with the author of the 208 page AARP 2007 study, u201cReverse Mortgages: Niche Product or Mainstream Solution?u201d and was told they didnu2019t ask that question. As far as I know, the AARP study is the biggest survey of reverse mortgages to date. You postulate, u201cHalf empty half fullu201d, I say, u201cLetu2019s examine the glass to make sure there isnu2019t a hole in the bottomu201d. We all should be concerned about avoiding a mess.n

  • You must live in an area where extended families all live together. I have never originated a reverse mortgage where anyone but the seniors on title live in the home. I have met with a few clients who had a son or daughter live with them and made it very clear what happens when the senior dies. They ended up not closing. I don’t know what percentage of reverse mortgage borrowers have extended family living with them, but my guess is that it is fairly low.

  • Prescott, calm yourself please. The “Chicken Little” approach is of course daunting with everything in society. There are hundreds of these homes where there are no “low wealth adults” living now, and never will be. You sound like one of the politicians running scared from all activity because of the meltdown caused by sub-prime and fraudulant loan officers. If we approach Reverse the same way we approached other critical areas over the past 4-5 decades, we will come up with solutions and procedures that will be beneficial to the seniors, as well as society as a whole. Let’s look at it as a societal benefit, rather than condeming it as a failure up front. You can throw out all of your numbers and make usumptions based on personal projections and beliefs all day long and make anything look horribly ineffective. Remember the old adage, “figures lie and liers figure”, we could argue figures and personal projections all year long and never come to a positive conclusion. Half full half empty??

  • >>Living in the homes along with the borrowers are family members … Many of the tenants will end up on the streetrnrnI recently learned that if one of those family members are an heir to the Estate, they can use a chapter 13 bankruptcy to pay back the Lender. That’d keep them in the house and off the street.

  • Why do you assume there are adult children (and grandchildren) tenants living with a large percentage of the outstanding HECM borrowers? nnWhat happens to the tenants when borrowers with conventional loans are foreclosed on?

  • Hereu2019s what the government needs to grapple with: Whatu2019s going to happen with those who live in the home once the borrower s die? Beginning in the year 2020 there will be 100,000 homes ordered vacated (assuming the surviving tenants wonu2019t be able to pay of the loan u2013 since the surviving tenants are more likely then not, low wealth adults, children and grand children) Beginning in the year 2020 and continuing into the foreseeable future there will be 100,000 homes per year emptied out (all tenants will be evicted) due to the death of the borrower. The questions that need to be asked is who are these tenants and where will they go? The vacating of 100,000 homes per year is a projection based on the actuarial life expectance of the borrowers or reverse mortgages, as a group.tnThe average age of the borrower 73 years of age (AARP Policy Institute Study #2007-22)nActuarial life expectance of a 73 year old Male = 10 years and Female = 13 yearsn(SSA Actuarial Table)nBeginning 2007 there has been over 100,000 reverse mortgages sold per year.ttnProjection: 100,000 vacated homes per year beginning 2020.n1 Million homes by 2030 (ten years @ 100,000 per year)nReverse mortgage borrowers generally have few other assets. Living in the homes along with the borrowers are family members, extended family, grandchildren, etc. Many of the tenants will end up on the street or forced to move into less accommodating environments leading to social stresses. Those with disabilities face the probability of having to be institutionalized, creating a need for Medicaid long-term care resources. Future Social Impact is a Concern of the Government.n

  • Hopefully, when they complete their studies, they’ll learn that the program is one of the most highly regulated financial products available and that seniors have all the protections they need. Then they’ll tell these Senators to leave it alone. nnWe can all dream.

  • Hopefully, when they complete their studies, they'll learn that the program is one of the most highly regulated financial products available and that seniors have all the protections they need. Then they'll tell these Senators to leave it alone.

    We can all dream.

  • Here’s what the government needs to grapple with: What’s going to happen with those who live in the home once the borrower s die? Beginning in the year 2020 there will be 100,000 homes ordered vacated (assuming the surviving tenants won’t be able to pay of the loan – since the surviving tenants are more likely then not, low wealth adults, children and grand children) Beginning in the year 2020 and continuing into the foreseeable future there will be 100,000 homes per year emptied out (all tenants will be evicted) due to the death of the borrower. The questions that need to be asked is who are these tenants and where will they go? The vacating of 100,000 homes per year is a projection based on the actuarial life expectance of the borrowers or reverse mortgages, as a group.
    The average age of the borrower 73 years of age (AARP Policy Institute Study #2007-22)
    Actuarial life expectance of a 73 year old Male = 10 years and Female = 13 years
    (SSA Actuarial Table)
    Beginning 2007 there has been over 100,000 reverse mortgages sold per year.
    Projection: 100,000 vacated homes per year beginning 2020.
    1 Million homes by 2030 (ten years @ 100,000 per year)
    Reverse mortgage borrowers generally have few other assets. Living in the homes along with the borrowers are family members, extended family, grandchildren, etc. Many of the tenants will end up on the street or forced to move into less accommodating environments leading to social stresses. Those with disabilities face the probability of having to be institutionalized, creating a need for Medicaid long-term care resources. Future Social Impact is a Concern of the Government.

    • Why do you assume there are adult children (and grandchildren) tenants living with a large percentage of the outstanding HECM borrowers?

      What happens to the tenants when borrowers with conventional loans are foreclosed on?

    • You must live in an area where extended families all live together. I have never originated a reverse mortgage where anyone but the seniors on title live in the home. I have met with a few clients who had a son or daughter live with them and made it very clear what happens when the senior dies. They ended up not closing. I don't know what percentage of reverse mortgage borrowers have extended family living with them, but my guess is that it is fairly low.

  • >>Living in the homes along with the borrowers are family members … Many of the tenants will end up on the street

    I recently learned that if one of those family members are an heir to the Estate, they can use a chapter 13 bankruptcy to pay back the Lender. That'd keep them in the house and off the street.

    • Rainmand, last year I attended a presentation by Western Center on Law and Poverty and they were assuming that the non-borrowers were simply tenants limited to landlord tenant protections. What you’re saying is interesting but how can they have standing if their names are not on the property title? I hope you’re right. Please let me know where I could find out more about this.

  • Prescott, calm yourself please. The “Chicken Little” approach is of course daunting with everything in society. There are hundreds of these homes where there are no “low wealth adults” living now, and never will be. You sound like one of the politicians running scared from all activity because of the meltdown caused by sub-prime and fraudulant loan officers. If we approach Reverse the same way we approached other critical areas over the past 4-5 decades, we will come up with solutions and procedures that will be beneficial to the seniors, as well as society as a whole. Let's look at it as a societal benefit, rather than condeming it as a failure up front. You can throw out all of your numbers and make usumptions based on personal projections and beliefs all day long and make anything look horribly ineffective. Remember the old adage, “figures lie and liers figure”, we could argue figures and personal projections all year long and never come to a positive conclusion. Half full half empty??

  • Hawkey,
    I really don’t think it’s a “Chicken Little” thing. I think it’s more a “Look before you leap”. Michael Jones states that he doesn’t know what percentage of reverse mortgage borrowers have extended family members living with them. That’s the point. No one really knows who’s living in the homes. No one is tracking it and no studies have been conducted. I checked with the author of the 208 page AARP 2007 study, “Reverse Mortgages: Niche Product or Mainstream Solution?” and was told they didn’t ask that question. As far as I know, the AARP study is the biggest survey of reverse mortgages to date. You postulate, “Half empty half full”, I say, “Let’s examine the glass to make sure there isn’t a hole in the bottom”. We all should be concerned about avoiding a mess.

  • By the way, this is NOT the Wall Street Reform bill like our President refers to it as. The bill is called, the “Financial Regulatory Reform Bill” ! Plain and simple.

    I have spoken many times on this bill over the past few weeks. This bill will affect the reverse mortgage industry. The new Financial protection Bureau, which most likely will established by a group of bureaucrats that have no business passing judgment on what should regulate our industry and what should be done to protect the senior citizen from such evil people as us?

    This bill is not only about the reverse mortgage industry, this is about a bill that will affect every American citizen adversely. As I had said before, if this bill passes the senate, we will see the largest shift of power to the federal government than I can ever remember.

    I pleaded last week for everyone to please contact senators, mainly the Democrats but all senators. I asked you all to please ask the senators to vote NO on this bill. I don't know how many of you and the other people I sent the plea out to for help on this issue reacted? Those of you that did nothing, may wind up with what you deserve. Those who tried, I congratulate you for your effort, lets hope it was not all for naught.

    This bill beats them all my friends, I am infuriated but saddened by what I see taking place in our great nation. Time is up, nothing more we can do but wait for the results. If the bill passes, we must do what ever it takes to have it revoked.

    Thank you,

    John A. Smaldone

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